Greenspan: I didn't grasp subprime threat (NOW HE TELLS US!)

http://money.cnn.com/2007/09/13/news/economy/greenspan.ap/index.htm?postversion=2007091313 ^ | 9-13-07

[Hydroshock]

WASHINGTON (AP) -- Former Federal Reserve Chairman Alan Greenspan acknowledges he failed to see early on that an explosion of mortgages to people with questionable credit histories could pose a danger to the economy.

In an upcoming interview, Greenspan said he was aware of "subprime" lending practices where home buyers got very low initial rates only to see them later jacked up, causing severe payment shock. But he said he didn't initially realize the harm they could do.

Former Federal Reserve Chairman Alan Greenspan Video More video

Robert Miller of the Daily Telegraph joins CNN to discuss the Bank of England and European Central Bank's rate decision. Play video

"While I was aware a lot of these practices were going on, I had no notion of how significant they had become until very late," he said a CBS "60 Minutes" interview to be broadcast Sunday. "I really didn't get it until very late in 2005 and 2006," Greenspan said.

An excerpt of the interview was released Thursday.

A meltdown in the subprime mortgage market has rocked Wall Street. Foreclosures and late payments have soared and lenders have gone out of business. Nervous financial institutions tightened credit standards, making it harder for even more creditworthy borrowers to get financing. This has increased chances the economy might slide into a recession this year.

[Leatherneck_MT]

I’m not an economist or a banker and I could see that. Greenspan can’t be that much of an idiot.

[Hydroshock]

PING

[MaryFromMichigan]

Hey, it isn't like it's his job to stay on top of these things.

[Hydroshock]

I am at a loss for words.

[Hydroshock]

I know.

[RightWhale]

Evidently Jazzman wasn’t a regular lurker at FR.

[Hydroshock]

No matter how you want to slice it you will always have to pay the band for the dance in the end.

[A.A. Cunningham]

Greenspan Says He Knew About Abuses in Subprime Lending

Poor Al, he's been hypnotized by Andrea Mitchell's stunning looks.

[Hoffer Rand]

Me too. I’ve been saying for more than 4 years that this was coming. I could see a LOT of people buying WAY more house than they could afford because interest rates were so low. They were buying more expensive cars, too, and running up their CCs. I said then that this situation was going to get ugly, because interest rates WOULD go up. And I predicted there would be voices calling for the government to bail out these “poor victims.” If the goverment does, it’s going to make the S&L bailout look like a petty cash withdrawal.

[Hydroshock]

Exactly. The cost of something to many in this world is nto what it cost, but can I afford the payments. As standards got looser, and loans got more creative people found that for the now they could get more for what they could afford in payments. But now that is coming to an end, even though many shrills are calling for anything they think cna pump up the balloon somemore.

I have always looked at teh total cost of ownership, and that includes of course how much interest is paid if I finance it.

[ex-Texan]

Greenspan is lying. JMHO. He is responsible for creating three massive bubbles that emptied the pockets of millions of Americans: the dotcom bubble, the housing bubble and the credit bubble. He is traveling the world making millions spewing propaganda and garbage like a hired gun for hire. Time for him to just shut up and slink back under a rock.

Today -- after the buzz about advertising restrictions on lenders -- there have been commercials running out here pitching Reverse Mortgages.

They say something like, "Is your home worth $ 250,000? We can get you $ 150,000 cash or $ 460 /per month. No payments ever." These vultures prey upon gullible seniors with high medical bills.

The Federal government ought to conduct live hearings on the reverse mortgage scam. But Congress has been paid off with millions in donations. "We have the best Congress that money can buy!" Both parties lined up with open hands to accept legalized bribes. Some may have taken illegal cash pay offs. I'm sorry. I ought to have said, "Most have taken illegal under the table payoffs."

[PeterPrinciple]

When power is centralized a mistake affects many people. When power is diversified like in state and local govt, mistakes will still be made but won’t take the whole nation down.

[Hoffer Rand]

I agree. I'm amazed that so many people don't consider "true cost of owning" whether that's a house or a car or whatever. They fail to consider things like property taxes, utilities (why doesn't it occur to people that twice the house will have approx. twice the utilies?), and insurance on their house, or a slush fund for the roof/appliances/carpeting/whatever that eventually do need replaced. With cars, they fail to plan for registration renewal and insurance, plus a slush fund for tires, routine and non-routine maintenance. Then, they are completely surprised when these things roll around, and of course they can't afford them.

I keep seeing high end new cars with expired tags, and I'd bet a lot of them are people who failed to consider the state was going to have its hand out every year.

[ANGGAPO]

I guess that he never realized that so many people could be so damned stupid when it comes to money. Adjustable rate mortgage on a house for 30 years? It’s hard to believe.

[RipSawyer]

I guess that he never realized that so many people could be so damned stupid when it comes to money. Adjustable rate mortgage on a house for 30 years? It’s hard to believe.
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>

I swear that most of the stuff the “financial experts” are trying to teach people about managing money now are the things my parents generation knew by the time they were 16.
It basically amounts to squeezing every nickel until the buffalo drops a pile of dung.

[Mariner]

I'm not amazed, these people are greedy and stupid and I don't care what happens to them...inclusive of the people who enabled them (Wall St who built and backed the CDOs and derivatives).

The ONLY thing I care about is that the taxpayer not be burdened by their folly and hubris...and that the dollar not be devalued to bail them out.

[Leatherneck_MT]

To me this is a classic example of bait and switch, except you are telling them ahead of time that you will in the future, switch on them.

Now most people I know wouldn’t do it (and don’t), but there are others... what the hell are you thinking?

Either way it goes, I believe this kind of lending should be outlawed.

[Leatherneck_MT]

The only problem with you not caring is, you will be made to bail them out eventually.

[AmericanInTokyo]

Japanese TV here our time last night had a very good close up program on this whole mess.

First they educated the Japanese on just what the hell is going on and the structure over in the USA.

They did not pull any punches. They made a connection to low income, untrustworthy immigrants. They featured a Hispanic family that, living 10 to a home, the main bread winner being in the US for 30 year, but when interviewed HE COULD NOT SPEAK ENGLISH and said he was going to sue the mortgage company because he did not understand what he signed. The Japanese TV hosts just twisted and turned their heads in disbelief at the sorry state of affairs in our country!